How better financing options can help drive electric two-wheeler adoption in India

Cost-effectiveness stood at the top as a primary reason for the adoption of E2Ws. Preliminary analysis revealed that about 50% of the E2W users opted for an electric vehicle because it’s cost-effective.

EVs have become the center of attraction for the global automobile industry. In comparison to vehicles running on fossil fuels, they score higher on sustainability and reliability. However, the adoption rate in India has been lower because of high costs. High import costs and duties imposed on EVs spike up the MRP. To tackle this and support the global EV movement, policymakers have recommended reforms. Manufacturers are investing in ‘Make in India’ initiatives to increase affordability.

As per NITI Aayog, Government think-tank, faster Adoption and manufacturing of Hybrid and Electric Vehicles (FAME II), and other policies supporting electric mobility will help push 30 % electric vehicle penetration by 2030. The aim is to achieve a segmented penetration of 80% for two-wheelers and three-wheelers. Along with manufacturers, this is a great segment and opportunity for financiers.

India’s middle-class in smaller towns will find great value in a 2-wheeler EV (E2Ws) offering that is affordable and convenient. Adoption will increase in smaller towns and cities, with financial support. However, to create a more sustainable solution, financial institutions need use-cases and insights. There is very limited data available on the consumers of this segment as the research is still at a nascent stage. Hence, to understand consumer behavior, limitations, and strengths, LoanTap carried out an extensive survey across tier-2 and tier-3 cities in India. Below are some of the insights that can enable lenders to create need-aligned offerings:

The primary reason for adoption

Cost-effectiveness stood at the top as a primary reason for the adoption of E2Ws. Preliminary analysis revealed that about 50% of the E2W users opted for an electric vehicle because it’s cost-effective. With fuel prices soaring across the country, electric vehicles prove to be a viable option. Delineating further, an E2W demands an average of 50 paise per km as compared to fuel consumption bikes that cost around INR 4-5 per liter.

The low maintenance factor was also key in the adoption of EVs. The implementation cost of E2Ws is lower than traditional combustion engine vehicles (with reference to BS-VI emission norms). The results indicated that about 50% of E2W users are using this means of transport to meet their day-to-day needs. This includes local commute, education, work typically accounting for an average of 30+ km per day. To meet their daily needs, the users preferred a vehicle that did not require much maintenance and had minimum breakdowns.

The challenges in adoption

Despite all the cost and maintenance perks, there are still a few major challenges in EV adoption. A surprising finding was that the lack of a proper charging infrastructure was not the primary challenge pointed out by the users. Instead, most subjects pointed out the quality of the primary battery as a major concern. The battery is the most important part of an electric vehicle, but most users were skeptical of the quality. With most users being early adopters of E2Ws in the country, mis selling remains a major concern for the users. The possibility of getting fooled by the dealers, and being misled into purchasing an EV that does not fulfill the consumer’s requirements is quite high in the Indian markets.

The right financing options are always a driving force behind the sales of any motor vehicle. This came out to be another major barrier in the expansion of the E2W market. There is a lack of availability of convenient credit to support the purchase of E2Ws. Mainstream lending organizations often do not consider two-wheelers as a prime lending segment. This is because the two-wheeler market (more than 50 %) is made up of low-cost, entry-level motorcycles/scooters. These are mainly purchased by buyers belonging to the low-income or mid-income group.

Game Changer for the E2W industry: Easy-Credit Facilities

India is predominantly a 2-wheeler market. More than 80 % of ICE sales in India come from 2-wheelers. E2Ws can be a game-changer in the industry, not only in Tier-1, but also in Tier-2, and Tier-3 cities. The opportunity and market for lending institutions lie in these markets. E2Ws offer fewer parking issues and ease in charging vehicles. With improving infrastructure and electrification, rural areas and smaller towns are likely to witness a revolution in mobility. This segment has a strong need for easy and hassle-free financing services. With flexible financing options, India will be in line to build a future where the affordability of EVs is no longer an impediment to adoption!

Author: Satyam Kumar, CEO and Co-founder, LoanTap

Disclaimer: The views and opinions expressed in this article are solely those of the original author. These views and opinions do not represent those of The Indian Express Group or its employees.

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